FEDERAL RESPONDENTS’ UNCITED RESPONSE TO THE WIRELESS CARRIER
UNIVERSAL SERVICE FUND PRINCIPAL BRIEF
IN THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
NO. 11-9900
IN RE: FCC 11-161
ON PETITIONS FOR REVIEW OF AN ORDER OF THE
FEDERAL COMMUNICATIONS COMMISSION
WILLIAM J. BAER
ASSISTANT ATTORNEY GENERAL
ROBERT B. NICHOLSON
ROBERT J. WIGGERS
ATTORNEYS
UNITED STATES
DEPARTMENT OF JUSTICE
WASHINGTON, D.C. 20530
SEAN A. LEV
GENERAL COUNSEL
PETER KARANJIA
DEPUTY GENERAL COUNSEL
RICHARD K. WELCH
DEPUTY ASSOCIATE GENERAL COUNSEL
LAURENCE N. BOURNE
JAMES M. CARR
MAUREEN K. FLOOD
COUNSEL
FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, D.C. 20554
(202) 418-1740
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TABLE OF CONTENTS
Table Of Authorities ........................................................................................ iii
Glossary .......................................................................................................... vii
Issue Presented .................................................................................................. 1
Introduction And Summary Of Argument ........................................................ 1
Argument ........................................................................................................... 9
I. The FCC Reasonably Determined That It Has Authority
To Adopt The Universal Service Reforms In The Order. ......................... 9
A. The FCC Reasonably Found That It Has Authority Under
Section 254 Of The Act To Condition Receipt Of
Universal Service Support On Deployment Of
Broadband-Capable Networks. ............................................................. 9
1. Section 254(b). ................................................................................ 10
2. Section 254(e). ................................................................................ 13
B. The Order Does Not Violate 47 U.S.C. §153(51). ............................. 16
1. The FCC May Provide Universal Service Support For
Facilities Used To Provide Telecommunications And
Information Services. ...................................................................... 17
2. The FCC May Provide Universal Service Support To
Entities That Offer Telecommunications And
Information Services. ...................................................................... 18
3. The Order Does Not Impose Impermissible Common
Carrier Regulation On Information Services. ................................. 21
C. The FCC Reasonably Found That Section 706 Of The
1996 Act Independently Authorizes It To Require
Recipients Of Universal Service Support To Deploy
Broadband-Capable Networks. ........................................................... 23
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II. The FCC Reasonably Offered Price Cap Carriers Universal
Service Support In Exchange For A State-Level
Commitment To Deploy Broadband. ....................................................... 26
III. The FCC’s New Rules For Supporting Mobile Wireless
Services Are Reasonable. ......................................................................... 31
A. The FCC Reasonably Eliminated The Wasteful Identical
Support Rule. ....................................................................................... 33
B. The FCC’s Mobility Fund Phase I Reverse Auction
Preserved State Commission Authority Under Sections
214(e)(2) And (5) Of The Act. ............................................................ 36
C. The FCC Reasonably Predicted That The Mobility Fund
Phase II Annual Budget Will Provide Sufficient Support. ................. 40
D. The FCC Reasonably Declined To Establish A Separate
Mobility Fund For Insular Areas. ........................................................ 43
Conclusion ....................................................................................................... 46
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TABLE OF AUTHORITIES
CASES
Ad Hoc Telecomms. Users Comm. v. FCC, 572 F.3d
903 (D.C. Cir. 2009) .................................................................................... 24
Alenco Commc’ns, Inc. v. FCC, 201 F.3d 608 (5th
Cir. 2000) ........................................................................................ 27, 30, 31
Bechtel v. FCC, 10 F.3d 875 (D.C. Cir. 1993) ................................................ 45
Cellco P’ship v. FCC, 700 F.3d 534 (D.C. Cir.
2012) ......................................................................................... 19, 21, 22, 23
Chevron USA, Inc. v. Natural Res. Def. Council,
467 U.S. 837 (1984) ............................................................................... 4, 15
Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir.
2010) ............................................................................................................ 25
CompTel v. FCC, 117 F.3d 1068 (8th Cir. 1997) ........................................... 27
CompTel v. FCC, 309 F.3d 8 (D.C. Cir. 2002) ............................................... 27
Franklin Savings Ass’n v. Dir., Office of Thrift
Supervision, 934 F.2d 1127 (10th Cir. 1991) .............................................. 42
Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965
(D.C. Cir. 1999) ........................................................................................... 30
Global Crossing Telecomms., Inc. v. Metrophones
Telecomms., Inc., 550 U.S. 45 (2007) ......................................................... 45
In re Dawes, 652 F.3d 1236 (10th Cir. 2011) .......................................... 13, 15
Lawrence Nat’l Bank v. Rice, 83 F.2d 642 (10th Cir.
1936) ............................................................................................................ 15
Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC,
533 F.2d 601 (D.C. Cir. 1976) ............................................................... 5, 19
Qwest Commc’ns Int’l, Inc. v. FCC, 398 F.3d 1222
(10th Cir. 2005) ................................................................................... passim
Qwest Corp. v. FCC, 258 F.3d 1191 (10th Cir.
2001) .................................................................................................... passim
Qwest Corp. v. FCC, 689 F.3d 1214 (10th Cir.
2012) ............................................................................................................ 42
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Rural Cellular Ass’n v. FCC, 588 F.3d 1095 (D.C.
Cir. 2009) ............................................................................................. passim
Rural Cellular Ass’n v. FCC, 685 F.3d 1083 (D.C.
Cir. 2012) .................................................................................. 33, 34, 42, 45
Sorenson Commc’ns, Inc. v. FCC, 659 F.3d 1035
(10th Cir. 2011) .................................................................................... 12, 15
Sw. Bell Tel. Co. v. FCC, 153 F.3d 523 (8th Cir.
1998) ............................................................................................................ 27
Sw. Bell Tel. Co. v. FCC, 19 F.3d 1475 (D.C. Cir.
1994) ............................................................................................................ 19
Texas Office of Pub. Util. Counsel v. FCC, 183 F.3d
393 (5th Cir. 1999) ................................................................... 12, 31, 40, 44
Transbrasil S.A. Linhas Aereas v. Dep’t of Transp.,
791 F.2d 202 (D.C. Cir. 1986) .................................................................... 39
Whitman v. Am. Trucking Ass’n, 531 U.S. 457
(2001) .......................................................................................................... 24
WWC Holding Co. v. Sopkin, 488 F.3d 1262 (10th
Cir. 2007) .................................................................................... 5, 22, 23, 39
STATUTES
47 U.S.C. §153(51).................................................................................. passim
47 U.S.C. §201 et seq. ....................................................................................... 2
47 U.S.C. §214(e) .............................................................................................. 7
47 U.S.C. §214(e)(1) .................................................................................. 4, 19
47 U.S.C. §214(e)(5) ....................................................................................... 39
47 U.S.C. §254 .................................................................................................. 2
47 U.S.C. §254(b)........................................................................... 2, 18, 29, 41
47 U.S.C. §254(b)(1) ......................................................................................... 3
47 U.S.C. §254(b)(2) ............................................................................... passim
47 U.S.C. §254(b)(3) ............................................................................... passim
47 U.S.C. §254(b)(5) ....................................................................................... 40
47 U.S.C. §254(b)(6) .................................................................................. 3, 12
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47 U.S.C. §254(b)(7) ................................................................................ 13, 28
47 U.S.C. §254(c)(1) ............................................................................ 3, 14, 15
47 U.S.C. §254(c)(3) ....................................................................................... 12
47 U.S.C. §254(e) .................................................................................... passim
47 U.S.C. §254(h)............................................................................................ 12
47 U.S.C. §254(h)(1)(A) ................................................................................. 38
47 U.S.C. §405(a) ............................................................................................ 12
47 U.S.C. §1302 ................................................................................................ 6
47 U.S.C. §1302(b)..................................................................................... 6, 23
REGULATIONS
47 C.F.R. §54.307 ........................................................................................... 33
ADMINISTRATIVE DECISIONS
Appropriate Framework for Broadband Access to
the Internet over Wireline Facilities, 20 FCC Rcd
14853 (2005) ............................................................................................... 21
Federal-State Joint Board on Universal Service, 12
FCC Rcd 8776 (1997) .......................................................................... 28, 44
Federal-State Joint Board on Universal Service, 18
FCC Rcd 22559 (2003), remanded in part, Qwest
Commc’ns Int’l, Inc. v. FCC, 398 F.3d 1222
(10th Cir. 2005) ........................................................................................... 44
Federal-State Joint Board on Universal Service, 19
FCC Rcd 23824 (2004) ............................................................................... 44
Federal-State Joint Board on Universal Service:
Promoting Deployment and Subscribership in
Unserved and Underserved Areas, Including
Tribal and Insular Areas, 15 FCC Rcd 12208
(2000) .......................................................................................................... 44
High-Cost Universal Service Support, 23 FCC Rcd
8834 (2008) .............................................................................. 33, 35, 38, 39
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High-Cost Universal Service Support, 25 FCC Rcd
18146 (2010), aff’d Rural Cellular Ass’n v. FCC,
685 F.3d 1083 (D.C. Cir. 2012) .................................................................. 33
High-Cost Universal Service Support, 25 FCC Rcd
4136 (2010) .................................................................................... 43, 44, 45
Implementation of Section 6002(b) of the Omnibus
Budget Reconciliation Act of 1993, 26 FCC Rcd
9664 (2011) ................................................................................................. 41
Mobility Fund Phase I Auction Closes Winning
Bidders Announced for Auction 901, 27 FCC Rcd
12031 (2012) ............................................................................................... 32
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GLOSSARY
1996 Act The Telecommunications Act of 1996
Act The Communications Act of 1934
APA The Administrative Procedure Act
COLR Carrier of Last Resort
ETC Eligible Telecommunications Carrier
FCC Federal Communications Commission
FNPRM Further Notice of Proposed Rulemaking
LEC Local Exchange Carrier
NPRM Notice of Proposed Rulemaking
USF Universal Service Fund
WCB Wireline Competition Bureau
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IN THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
NO. 11-9900
IN RE: FCC 11-161
ON PETITIONS FOR REVIEW OF AN ORDER OF
THE FEDERAL COMMUNICATIONS COMMISSION
FEDERAL RESPONDENTS’ UNCITED RESPONSE TO THE WIRELESS CARRIER
UNIVERSAL SERVICE FUND PRINCIPAL BRIEF
ISSUE PRESENTED
Whether the Federal Communications Commission (“FCC”) lawfully
reformed its universal service rules to efficiently enhance access to wireless
mobile voice and broadband services in rural America.
INTRODUCTION AND SUMMARY OF ARGUMENT
In addition to the challenges to the universal service reforms addressed
in the FCC’s Principal USF Brief, a separate group of smaller mobile wireless
service providers attack that part of the Order on review.1 Their sometimes
overlapping claims are equally unfounded, see FCC Principal USF Br. 1-2,
and the Court should reject them.
1 Connect America Fund, 26 FCC Rcd 17663 (2011) (“Order”) (JA__).
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I. Petitioners broadly but mistakenly assert that the FCC lacked
authority to adopt the reforms in the Order. Petitioners’ various claims rest
on the assertions that the Order (1) unlawfully provides federal universal
service support for “information services,” notably broadband Internet access,
and (2) subjects “information services” to impermissible common carrier
regulation under Title II of the Act, 47 U.S.C. §201 et seq. Petitioners are
wrong on both counts.
A. The Order does not provide federal universal service support for
any services that are not authorized for such support under federal law. In
particular, the FCC reasonably determined that section 254 of the
Communications Act of 1934 (“the Act”), 47 U.S.C. §254, authorized the
agency to provide such support for networks capable of providing both voice
and broadband Internet access services.
1. In this regard, petitioners contend that the FCC erred when it relied
on 47 U.S.C. §254(b) to inform its reading of the agency’s authority under
other statutory provisions, notably 47 U.S.C. §254(e). While petitioners
characterize the universal service principles in section 254(b) as mere “policy
statements,” Br. 25, this Court has ruled that they provide the FCC not only
the authority, but also a duty, to ensure that the objectives in that provision
are realized. See Qwest Corp. v. FCC, 258 F.3d 1191, 1200, 1204 (10th Cir.
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2001) (“Qwest I”); Qwest Commc’ns Int’l, Inc. v. FCC, 398 F.3d 1222, 1238
(10th Cir. 2005) (“Qwest II”). Consistent with this precedent, the FCC in the
Order exercised its authority under section 254 to condition the receipt of
federal subsidies on the deployment of broadband-capable networks. As
required by 47 U.S.C. §254(b)(1)-(3), that result promotes access to
telecommunications and information services that are affordable and
reasonably comparable between rural and urban areas.
Petitioners assert that the section 254(b)(2) and (3) principles
referencing “information services” are limited to “advanced
telecommunications and information services” provided to schools, libraries,
and rural health care providers. This argument, which has been waived, lacks
merit. Given the separate directive in 47 U.S.C. §254(b)(6) that schools,
libraries, and rural health care providers should have access to advanced
telecommunications services, there is no basis to restrict the broad language
in sections 254(b)(2) and (3) to those same institutional beneficiaries. Such a
reading would render the section 254(b)(2) and (3) principles meaningless.
2. Petitioners also contend that the FCC lacks authority under section
254(e) because the phrase “for which the support is intended” in that
provision allegedly refers to the “telecommunications services” deemed
eligible for support under 47 U.S.C. §254(c)(1). To the contrary, the FCC
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reasonably interpreted that phrase to reference the universal service principles
in section 254(b) – thus giving full effect to Congress’s stated objectives.
Petitioners do not explain how the FCC can achieve the principles in sections
254(b)(2) and (3) – which direct that “[a]ccess to advanced
telecommunications and information services should be provided in all
regions of the Nation,” and that consumers in rural areas should have access
to advanced services comparable to those in urban areas – if it cannot
condition federal universal service funding on deployment of the networks
required to provide information services. In all events, it was at least
reasonable for the FCC to read section 254(e) as it did, and its result should
thus be upheld under Chevron USA, Inc. v. Natural Res. Def. Council, 467
U.S. 837, 842-43 (1984).
B. Petitioners also rely on 47 U.S.C. §153(51), which provides that
“[a] telecommunications carrier shall be treated as a common carrier … only
to the extent that it is engaged in providing telecommunications services.”
1. Petitioners argue that an entity cannot provide an information
service and still be a “common carrier” that qualifies as an “eligible
telecommunications carrier” (“ETC”) that may receive universal service
subsidies under 47 U.S.C. §§214(e)(1) and 254(e). But it is well-established
that an entity can be a common carrier with regard to some activities, but not
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others. See Nat’l Ass’n of Regulatory Util. Comm’rs v. FCC, 533 F.2d 601,
608 (D.C. Cir. 1976) (“NARUC”). Thus, the provision of broadband Internet
access (an “information service”) does not render a provider ineligible for
universal service support. Indeed, for more than a decade prior to the Order,
the FCC’s rules permitted ETCs to offer telecommunications and information
services over a single, dual-use network subsidized with federal universal
service support. In any event, many ETCs voluntarily offer broadband on a
common carrier basis today, so petitioners’ argument fails on its own terms.
2. Petitioners’ claim that the Order subjects broadband Internet access
to common carrier regulation is incorrect as a matter of law. While the Order
requires carriers that decide to accept universal service funding to provide
broadband service as a “public interest obligation,” this requirement is
conditional – carriers only have to provide broadband if they voluntarily seek
federal subsidies. As this Court has held, such conditional obligations are not
a common carriage requirement. See WWC Holding Co. v. Sopkin, 488 F.3d
1262, 1268, 1274 (10th Cir. 2007). It follows that the Order does not violate
47 U.S.C. §153(51) by imposing common carrier regulation on an
information service.
C. The FCC separately concluded that it has independent authority
under section 706 of the Telecommunications Act of 1996 (the “1996 Act”),
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47 U.S.C. §1302, to support broadband facilities and services. Where, as
here, the FCC has found that broadband is not being deployed in a reasonable
and timely manner, that provision empowers the FCC to “take immediate
action to accelerate deployment of such capability by removing barriers to
infrastructure investment and by promoting competition in the
telecommunications market.” 47 U.S.C. §1302(b). Petitioners do not dispute
that evidence in the record showed that support for broadband helps achieve
both those statutory objectives. They do contend, however, that section 706
provides the agency no authority to impose common carrier regulation on
broadband internet access service. Petitioners’ argument is baseless, because
the FCC is not regulating broadband, much less doing so on a common
carrier basis.
II. To encourage the fast and efficient deployment of dual-use
facilities over large geographic areas, the Order offers incumbent local
exchange carriers (“LECs”) subject to price cap regulation a one-time
opportunity to claim federal high-cost universal service support in exchange
for a commitment to deploy a broadband-capable network in a state.
Petitioners argue that this violates the FCC-adopted principle of “competitive
neutrality.” But the FCC reasonably found that principle outweighed by the
advancement of other principles, notably those in sections 254(b)(2) and (3).
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As this Court has explained, the FCC has substantial discretion to determine
how best to balance competing section 254(b) principles in cases like this
one. Qwest I, 258 F.3d at 1199. Moreover, petitioners’ claims of disparate
treatment are overstated: wireless carriers like petitioners that meet the FCC’s
service requirements may be eligible for support where the price cap carrier
declines support, and they also have access to a separate Mobility Fund.
III. In response to the increasing importance of mobile services to
consumers, the Order created the Connect America Fund (“CAF”) Mobility
Fund to support the deployment of mobile broadband networks.
A. Petitioners challenge the FCC’s decision to eliminate the identical
support rule, which provided competitive ETCs the same per-line amount of
federal high-cost universal service support as the incumbent LEC serving the
same area. The FCC had good reason to do so, having found that the rule had
not functioned as intended and had failed to support mobile voice service
efficiently. The record amply supported that expert judgment.
B. Petitioners argue that a new competitive bidding mechanism used
to distribute $300 million in one-time high-cost support to wireless carriers
usurps state commission authority under section 214(e) of the Act. That
argument fails because it conflates eligibility for subsidies with the right to
receive subsidies. Section 214(e) authorizes the states to determine which
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carriers are eligible for support, and where they are eligible for support;
nothing in the Order changes that. But a carrier is not entitled to receive
universal service support merely by virtue of its designation as an ETC.
C. The Order budgeted $500 million annually for ongoing support of
mobile services. The FCC found that this amount would provide sufficient
support to ensure affordable and reasonably comparable mobile voice and
broadband service. Petitioners disagree with that predictive judgment, but the
FCC’s conclusion was well supported by record evidence showing that (1)
elimination of the identical support rule would significantly reduce the cost of
funding mobile wireless services and (2) the four national wireless carriers
would not reduce coverage in the absence of universal service support. As an
additional safeguard, the FCC established a waiver process that a wireless
carrier may use to demonstrate the need for additional support.
D. Finally, the Order reasonably denied petitioners’ request to
establish a separate Mobility Fund (similar to the Tribal Mobility Fund) for
insular areas. Petitioners’ proposal was based on arguments that the FCC had
considered and rejected on multiple occasions – including in Appendix D to
the Order.
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ARGUMENT
I. THE FCC REASONABLY DETERMINED THAT IT HAS
AUTHORITY TO ADOPT THE UNIVERSAL SERVICE
REFORMS IN THE ORDER.
A. The FCC Reasonably Found That It Has Authority
Under Section 254 Of The Act To Condition Receipt Of
Universal Service Support On Deployment Of
Broadband-Capable Networks.
The FCC “ha[s] a ‘mandatory duty’ to adopt universal service policies
that advance the principles … in section 254(b), and … the authority to
‘create some inducement’ to ensure that those principles are achieved.”
Order ¶65 (JA__) (citing Qwest I, 258 F.3d at 1200, 1204). Two of those
principles expressly identify access to information services as an integral
component of universal service. See 47 U.S.C. §254(b)(2) (providing that
“[a]ccess to advanced telecommunications and information services should be
provided in all regions of the Nation”) & §254(b)(3) (providing that
consumers in rural areas should have access to telecommunications and
information services that are reasonably comparable to those in urban areas).
Relying on section 254(e), which directs ETCs to “use … support only
for the provision, maintenance, and upgrading of facilities and services for
which the support is intended,” the Order “require[d] carriers receiving
federal universal service support to invest in modern broadband-capable
networks.” Order ¶65 (JA__). To ensure that “ETCs that receive universal
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service funding are … using support for [that] purpose,” id. ¶110 (JA__), the
Order further required ETCs “to offer broadband service … that meets
certain basic performance requirements and to report regularly on associated
performance measures.” Id. ¶86 (JA__).
These funding conditions, the FCC found, were necessary to achieve
the section 254(b) principles related to advanced telecommunications and
information services – in particular, that consumers in rural areas have access
to affordable broadband Internet access service that is reasonably comparable
to such service in urban areas. Order ¶¶65, 87, 91, 106, 113 (JA__, __, __,
__, __).
Petitioners contend that the FCC is prohibited from providing federal
universal service support for “information services” (specifically, broadband
Internet access), and the networks used to provide those services. As shown
below, under standard Chevron analysis, petitioners’ arguments provide no
basis to set aside the Order.
1. Section 254(b).
Petitioners argue that the FCC was prohibited from relying on sections
254(b)(2) and (3) of the Act to inform its reading of the agency’s authority
under other statutory provisions, notably 47 U.S.C. §254(e). Br. 25-26.
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Petitioners’ interpretation of section 254(b) is contrary to this Court’s
precedent. In Qwest I, this Court acknowledged that “[t]he FCC may not
have jurisdiction with respect to intrastate rates,” but that the agency “is
nevertheless obligated to formulate its policies so as to achieve the [section
254(b)(3) principle] of reasonable comparability by inducing ‘sufficient ...
State mechanisms’ to do so.” 258 F.3d at 1200, 1204 (emphasis added).
Subsequently, in Qwest II, 398 F.3d at 1238, the Court affirmed the FCC’s
authority to withhold federal universal service support from states that failed
to certify that rural rates within their boundaries are “reasonably comparable”
to urban rates. Hence, petitioners’ contention that the section 254(b)
principles are mere “policy statements” that the agency cannot act to further
is untenable. Br. 25.
Petitioners also argue that the “references to ‘advanced
telecommunications and information services’ in §254(b)(2) and (b)(3)”
simply guide the FCC in implementing the separate schools and libraries
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program. Br. 25-26; see id. at 24, 34.2 This argument, however, is not
properly before the Court because it was not first presented to the FCC. See
47 U.S.C. §405(a); Sorenson Commc’ns, Inc. v. FCC, 659 F.3d 1035, 1044,
1048 n.8 (10th Cir. 2011) (“Sorenson II”).
In any event, the argument is unsound. Section 254(b)(3) provides that
“[c]onsumers in all regions of the Nation” – not just public institutions –
should have access to reasonably comparable “advanced telecommunications
and information services” at reasonably comparable rates. 47 U.S.C.
§254(b)(3). Likewise, section 254(b)(2) broadly states that “[a]ccess to
advanced telecommunications and information services should be provided in
all regions of the Nation.” Id. §254(b)(2). By contrast, 47 U.S.C. §254(b)(6)
specifically provides that “[e]lementary and secondary schools and
classrooms, health care providers, and libraries should have access to
advanced telecommunications services as described in subsection (h).” Given
section 254(b)(6)’s narrow focus on specifically enumerated institutional
beneficiaries, it was reasonable to conclude that sections 254(b)(2) and (3) –
2 The FCC, pursuant to 47 U.S.C. §254(c)(3), “may designate additional
services for … support … for schools, libraries, and health care providers.”
47 U.S.C. §254(h) requires carriers to provide those services at rates
subsidized by the federal universal service fund (“USF”). The FCC has
defined those “additional services” as “information services,” notably
broadband Internet access service. See Texas Office of Pub. Util. Counsel v.
FCC, 183 F.3d 393, 440-43 (5th Cir. 1999) (“TOPUC”).
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which use very broad language – are not limited to those same institutional
beneficiaries.3 Any other reading would make those separate statutory
provisions superfluous and ignore the differences in statutory text, in conflict
with established principles of interpretation. See In re Dawes, 652 F.3d 1236,
1242 (10th Cir. 2011) (statutes should be construed “so that no part will be
inoperative or superfluous”) (citation omitted).
In any event, petitioners’ reading of section 254(b) is not clearly
compelled by the statutory text, and thus the FCC’s alternative, reasonable
construction should be upheld under Chevron.
2. Section 254(e).
Petitioners’ section 254(e) argument likewise does not provide a basis
under Chevron to overturn the FCC’s reasonable construction of the statute.
Petitioners assert that the FCC lacked authority under section 254(e) of the
Act because the phrase “for which the support is intended” in that statutory
provision limits support to facilities used exclusively to provide the
3 Petitioners claim that the FCC “acquired no regulatory authority” by
adopting “support for advanced services” as a new principle because “the
FCC may not confer power upon itself.” Br. 26. The agency did not confer
power on itself. Congress conferred power on the FCC in 47 U.S.C.
§254(b)(7), which authorizes “[s]uch other principles as the Joint Board and
the Commission determine are necessary and appropriate for the protection of
the public interest, convenience, and necessity and are consistent with this
chapter.”
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“telecommunications services” deemed eligible for support pursuant to 47
U.S.C. §254(c)(1). Br. 17-18.
Petitioners’ reading of the statute is not reasonable, much less
compelled, as would be necessary to reverse the Order under Chevron. As
the Order explained, “[b]y referring to ‘facilities’ and ‘services’ as distinct
items for which federal universal service funds may be used, … Congress
granted the Commission the flexibility not only to designate the types of
telecommunications services for which support would be provided, but also
to encourage the deployment of the types of facilities that will best achieve
the principles set forth in section 254(b).” Order ¶64 (JA__); id. ¶308
(JA__). The FCC thus reasonably interpreted the phrase “for which the
support is intended” in section 254(e) to reference the universal service
principles in section 254(b) – two of which (§254(b)(2) & (3)) specifically
identify access to information services as an integral component of universal
service. Id.
Without acknowledging section 254(b), petitioners say that the FCC
should have “[c]onstru[ed] … §254(e) … in pari materia with §254(c)” to
limit universal service support to designated telecommunications services and
facilities. Br. 18. Section 254(c)(1) of the Act defines “[u]niversal service”
as “an evolving level of telecommunications services that the Commission
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shall establish periodically under this section, taking into account advances in
telecommunications and information technologies and services.” 47 U.S.C.
§254(c)(1). Reading section 254(c)(1) to prohibit the agency from
conditioning universal service subsidies on the deployment of broadband-
capable networks is unreasonable because it would undermine the FCC’s
efforts to promote access to information services, as expressly required by
section 254(b)(2) and (3), and thus violate a fundamental tenet of statutory
construction by rendering two of the section 254(b) principles “superfluous.”
See In re Dawes, 652 F.3d at 1242. It simply is not plausible, much less
mandatory, to read the statute in a way that disables the FCC from advancing
Congress’s explicit directives. See Chevron, 467 U.S. at 842-43; Sorenson II,
659 F.3d at 1042.
Petitioners further argue that “facilities” would have a “distinct”
meaning only if the statute referred to “facilities or services.” Br. 26-27
(emphasis added). That view is contrary to this Court’s interpretation of the
“conjunctive ‘and’ in the [§254(b)] phrase ‘preserve and advance universal
service’” – a phrase that “the Commission cannot satisfy … by simply doing
one or the other.” Qwest II, 398 F.3d 1236; see also Lawrence Nat’l Bank v.
Rice, 83 F.2d 642, 643 (10th Cir. 1936) (explaining that “[t]he phrase ‘and
cases for winding up the affairs of any such bank’ is in the conjunctive” and
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thus constitutes “a distinct grant of jurisdiction” to a district court under the
statute). Petitioners’ interpretation, moreover, disregards this Court’s
directive in Qwest II to give meaning to all of the statutory language in
section 254: if the FCC need only support the “services” designated by
section 254(c)(1), there would be no need to include the “distinct” term
“facilities” in section 254(e). Order ¶64 (JA__). Again, the FCC was not
required to adopt an interpretation of the statute that disabled it from
achieving the purposes Congress assigned to it – much less to do so by
reading the statute in a way that renders its operative language redundant.
B. The Order Does Not Violate 47 U.S.C. §153(51).
Petitioners argue that the Order runs afoul of the qualification in 47
U.S.C. §153(51) that “[a] telecommunications carrier shall be treated as a
common carrier … only to the extent that it is engaged in providing
telecommunications services.” Br. 12-30. According to petitioners, the
Order violates that proviso by: (1) funding facilities used to provide
telecommunications and information services; (2) funding entities that offer
telecommunications and information services; and (3) imposing common
carrier regulation on broadband Internet access, an “information service.” Id.
Petitioners’ first two contentions fail to acknowledge that carriers use
the same facilities to provide both telecommunications and information
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services. Thus, rescinding USF support to carriers that provide information
services, or use networks capable of providing information services, would
decimate the universal service program. In any event, as we explain below,
petitioners’ legal arguments uniformly lack merit.
1. The FCC May Provide Universal Service Support For
Facilities Used To Provide Telecommunications And
Information Services.
Petitioners assert that the first sentence of 47 U.S.C. §254(e), which
limits support to “an eligible telecommunications carrier under section
214(e),” incorporates the qualification in 47 U.S.C. §153(51) that “a
telecommunications carrier shall be treated as a common carrier … only to
the extent that it is engaged in providing telecommunications services.” Br.
17. Combining that reading with the second sentence of section 254(e),
which provides that a carrier may use support only for “facilities and services
for which the support is intended,” petitioners discern a legislative intent “to
limit ETCs to using support only to provide the telecom services that are
designated for support, as well as for any network components used for the
provision of such services.” Br. 17-18.
This novel reading of the Act would prohibit universal service support
for any dual-use facilities – despite the fact that hundreds of carriers,
including petitioners, expended support on such facilities under the FCC’s
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prior “no barriers” policy. See Order ¶¶64-65, 308 (JA__-__, __); pp. 19-20,
below. It thus makes little sense to “limit[] federal support based on the
regulatory classification of the services offered over broadband[-capable]
networks,” as petitioners contend the FCC must, because doing so “would
exclude from the universal service program providers who would otherwise
be able to deploy broadband infrastructure to consumers.” Order ¶72 (JA__).
Indeed, that outcome would be contrary to explicit statutory language in
section 254(b) that requires the agency to adopt universal service policies that
“preserve[]” and “advance[]” access to telecommunications and information
services. 47 U.S.C. §254(b); Qwest II, 398 F.3d at 1236. At the very least,
the FCC acted reasonably in rejecting a statutory construction that
disregarded such textual evidence of Congress’s intent to advance nationwide
access to information services.
2. The FCC May Provide Universal Service Support To
Entities That Offer Telecommunications And
Information Services.
Pursuant to section 254(e), only “eligible telecommunications
carrier[s],” i.e., those entities designated under section 214(e), “shall be
eligible to receive federal universal service support.” An ETC, by definition,
is a “common carrier” that “offer[s] the services that are supported by Federal
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universal service support mechanisms under section 254(c).” 47 U.S.C.
§214(e)(1).
Relying on 47 U.S.C. §153(51), petitioners argue that, once an entity
provides an information service, it cannot be a “common carrier” eligible for
ETC designation under section 214(e)(1) and universal service subsidies
under section 254(e). Br. 8-9, 13-14. They are wrong.
As the courts have recognized, “one can be a common carrier with
regard to some activities but not others.” NARUC, 533 F.2d at 608; Sw. Bell
Tel. Co. v. FCC, 19 F.3d 1475, 1481 (D.C. Cir. 1994). So long as a provider
offers some service on a common carrier basis, it may be eligible for
universal service support as an ETC under sections 214(e) and 254(e), even if
it offers other services – including “information services” like broadband
Internet access – on a non-common carrier basis. See Cellco P’ship v. FCC,
700 F.3d 534, 538 (D.C. Cir. 2012) (discussing “bifurcated regulatory
scheme” applicable to wireless providers’ mobile voice and data services).
Under the FCC’s prior “no barriers” policy, for example, many ETCs
offered traditional circuit-switched voice service (a “telecommunications
service”) and broadband (an “information service”) over a single, dual-use
network subsidized with federal universal service support. Order ¶¶64, 308
(JA__, __). Petitioners never identified a statutory violation concerning that
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policy in prior years and, in fact, supported that policy in the proceeding
below.4
Petitioners also seem to claim that the Order violates the Act because,
under sections 214(e) and 254(e), an ETC is eligible for support only for its
provision of “telecommunications services.” Br. 9, 16-17. This argument
hinges on petitioners’ mistaken view that the Order provides universal
service support under section 254 for broadband Internet access, an
information service. See id. That is not the case. The Order “support[s] the
provision of ‘voice telephony service’ and the underlying mobile network,”
under section 254. Order ¶309 (JA__); id. ¶64 (JA__). As the FCC
explained in this regard, “[t]hat the network will also be used to provide
information services to consumers does not make the network ineligible to
receive support.” Id. ¶309 (JA__).
Petitioners’ argument also fails on its own terms. Though broadband
Internet access service has been classified as an information service exempt
4 For example, petitioner United States Cellular Corporation (“U.S.
Cellular”) asked the FCC to codify the prior “no barriers” policy in its rules.
“While carriers rely on it today,” U.S. Cellular argued, “a clarification that
support may be used to invest in advanced 4G technology would provide
much needed certainty for carriers and accelerate the deployment of
equipment in rural areas that is capable of providing advanced broadband
services.” Letter from David A. LaFuria, Counsel for United States Cellular
Corporation, to Marlene H. Dortch, FCC, WC Docket No. 10-90 at 3 (filed
Oct. 19, 2011) (JA__).
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from common carrier regulation, the FCC has allowed carriers to provide
broadband on a common carrier basis. See Appropriate Framework for
Broadband Access to the Internet over Wireline Facilities, 20 FCC Rcd
14853, 14899-903 (¶¶ 86-95) (2005). Today, more than 800 incumbent LECs
voluntarily offer broadband subject to common carrier regulation under Title
II of the Act. See Connect America Fund, 26 FCC Rcd 4554, 4577 (¶60,
n.68) (2011) (JA__, __). Because, consistent with sections 214 and 254, an
ETC could voluntarily provide broadband on a common carrier basis to
satisfy the requirements of both the Order and petitioners’ construction of the
Act, petitioners’ “facial challenge” to the Order fails. Cellco P’ship, 700
F.3d at 549 (a court “must uphold [the Order]” against a facial challenge
“unless no set of circumstances exists in which it can be lawfully applied”)
(internal quotation marks and citation omitted).
3. The Order Does Not Impose Impermissible Common
Carrier Regulation On Information Services.
The Order conditioned the receipt of support on a carrier’s deployment
of a broadband-capable network pursuant to sections 254(b) and (e) of the
Act. Order ¶64 (JA__). To ensure that recipients of “universal service
funding are … using support for [that] purpose,” id. ¶110 (JA__), the Order
further required ETCs to offer broadband service (although that service itself
is not supported under the Order). Id. ¶86 (JA__). Thus, the Order does not
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“regulate” broadband Internet access service, Br. 12-30; rather, it merely
conditions the receipt of support from the USF (a federal subsidy program)
on the provision of broadband service by those who apply for it, Order ¶¶86-
114 (JA__-__). See FCC Principal USF Br. 20-24.
As this Court has explained, such conditions do not amount to
“regulation,” much less common carrier regulation under Title II of the Act.
See WWC Holding Co., 488 F.3d at 1268, 1274 (finding that conditioning a
wireless carrier’s ETC designation on compliance with “consumer protection
and operational standards” is not commensurate with common carrier
regulation). A funding condition, like the broadband public interest
obligation, is unlike common carrier regulation because providers voluntarily
assume the condition in exchange for support and “retain[] the ability to opt
out of [the condition] entirely by declining … federal universal service
subsidies.” Id. at 1274. The Order is fully consistent with this precedent.
Finally, even if the Order imposed some obligations that overlap with
common carrier duties (which it does not), “common carriage is not all or
nothing – there is a gray area in which, although a given regulation might be
applied to common carriers, the obligations imposed are not common carriage
per se.” Cellco P’ship, 700 F.3d at 547. In this regard, the Order does “not
extend[] the gamut of telephone regulations” under Title II of the Act to all
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providers of broadband Internet access service; it simply requires providers
that “approach[] the [FCC] to receive federal universal service subsidies,”
WWC Holding Co., 488 F.3d at 1274, “to offer broadband service … that
meets certain basic performance requirements and to report regularly on
associated performance measures,” Order ¶86 (JA__). In such a
circumstance, “the Commission’s determination” that the broadband public
interest obligation “does not confer common carrier status warrants
deference” from the Court. Cellco P’ship, 700 F.3d at 547.
C. The FCC Reasonably Found That Section 706 Of The
1996 Act Independently Authorizes It To Require
Recipients Of Universal Service Support To Deploy
Broadband-Capable Networks.
In section 706(b) of the 1996 Act, 47 U.S.C. §1302(b), Congress
instructed the FCC to “determine whether advanced telecommunications
capability is being deployed to all Americans in a reasonable and timely
fashion,” and, if the agency concludes that it is not, to “take immediate action
to accelerate deployment of such capability by removing barriers to
infrastructure investment and by promoting competition in the
telecommunications market.” 47 U.S.C. §1302(b). The FCC, in the Order,
found that “[p]roviding support for broadband helps achieve section 706(b)’s
objectives.” Order ¶66 (JA__); id. ¶¶67-68 (JA__-__); FCC Principal USF
Br. 29. Having found that “broadband capability is not being ‘deployed to all
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Americans in a reasonable and timely fashion,’” Order ¶70 (JA__) (quoting
section 706(b)) – a finding that petitioners do not challenge – the FCC
reasonably concluded that it “ha[s] independent authority under section 706
of the [1996 Act] to fund the deployment of broadband networks.” Id. ¶66
(JA__).
1. Petitioners assert that the FCC’s authority under section 706 would
result in Congress’s having “hid[den] elephants in mouseholes.” Br. 29
(quoting Whitman v. Am. Trucking Ass’n, 531 U.S. 457, 468 (2001)).
Petitioners’ argument rests on the sweeping assertion that Congress fenced
off broadband Internet access from FCC policymaking. Br. 3, 28-29. That is
incorrect.
As another court has found, “[t]he general and generous phrasing of
§706 means that the FCC possesses significant … authority and discretion to
settle on the best regulatory or deregulatory approach to broadband.” Ad Hoc
Telecomms. Users Comm. v. FCC, 572 F.3d 903, 906-07 (D.C. Cir. 2009); id.
at 908. Section 706 plainly envisions an FCC role in broadband policy, see
id., and section 706(b) commands the agency to act immediately to enhance
broadband deployment if the agency finds it lagging. In fact, Congress
described section 706 as a “fail safe” provision to ensure the FCC’s ability to
promote broadband deployment. Order ¶70 n.95 (JA__) (discussing section
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706’s legislative history). There is nothing obscure about such explicit
statutory commands.
Petitioners, relying on Comcast Corp. v. FCC, 600 F.3d 642, 659 (D.C.
Cir. 2010), further assert that the FCC “acknowledged” that “§706 grants it
no regulatory authority.” Br. 28; see id. at 10, 22-24. As we explained in the
FCC Principal USF Brief at 29-30, however, Comcast relied on an
understanding of the FCC’s precedent concerning section 706 that the agency
unequivocally rejected in a post-Comcast order. Accordingly, petitioners
find no support in Comcast.
2. Petitioners separately assert that “§706(b) conferred no Title II
regulatory authority over the services to be provided by the deployed
broadband telecom capability” and cannot “overrid[e] the [47 U.S.C.] §230
policy that any information service that provides Internet access should
remain unregulated.” Br. 28. Both of these claims hinge on petitioners’
mistaken view that the Order imposed Title II common carrier regulation on
broadband Internet access, an information service. Br. 27-29.
As we explain above, see Point I.B.3., the FCC did no such thing.
Petitioners’ attacks on the FCC’s section 706 authority (as well as its
authority under section 254, Br. 22-27) thus fail for the simple reason that the
Order does not “regulate” broadband. It follows that the FCC was not
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required to locate Title II authority in section 706(b) (or any other provision
of the Act) to enact the reforms in the Order, nor was the agency barred by
section 230(b) (or any other provision of the Act) from enacting those
reforms pursuant to section 706(b). Br. 10, 28, 30.5
II. THE FCC REASONABLY OFFERED PRICE CAP
CARRIERS UNIVERSAL SERVICE SUPPORT IN
EXCHANGE FOR A STATE-LEVEL COMMITMENT TO
DEPLOY BROADBAND.
The Order overhauled the rules that distribute high-cost universal
service support to incumbent LECs subject to price cap regulation. After an
initial freeze (“CAF Phase I”), the FCC will offer each price cap carrier high-
cost support in exchange for a commitment to offer voice and broadband
service in a state (“CAF Phase II”). Order ¶171 (JA__). Should they decline,
“support to serve the unserved areas located within the incumbent [LEC]’s
service area will be awarded by competitive bidding, and all providers will
have an equal opportunity to seek USF support.” Id. ¶178 (JA__). “[E]ven
where the incumbent LEC makes a state-level commitment, its right to
support will terminate after five years,” at which time the FCC expects to
distribute all support through a competitive bidding process. Id.
5 Likewise, because the Order does not regulate broadband Internet access
under Title II, the FCC was not required to find that broadband Internet
access is provided on a common carriage basis before enacting the universal
service reforms in the Order. Br. 20-22.
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In adopting these reforms, the FCC acknowledged that “the C[onnect]
A[merica] F[und] is not created on a blank slate, but rather against the
backdrop of a decades-old regulatory system.” Order ¶165 (JA__). The FCC
thus offered price cap carriers a limited right of first refusal “to avoid
consumer disruption … while getting robust, scalable broadband to
substantial numbers of unserved rural Americans as quickly as possible.” Id.;
id. ¶¶177-178 (JA__-__). Where, as here, the FCC adopts interim rules
designed to ease the transition to a new universal service regime, the courts
accord the agency substantial deference.6
Petitioners contend that the FCC “did not explain how it was fair to
disadvantage [competitive] ETCs by … reserving … support for large
[incumbent] LECs.” Br. 34. To the contrary, the FCC fully explained its
decision. In particular, it explained that “several considerations support[ed
its] determination not to immediately adopt competitive bidding everywhere.”
Order ¶¶174-175 (JA__-__). First, “the incumbent LEC is likely to have the
only wireline facilities” capable of supporting broadband in the areas eligible
for universal service support. Id. ¶175 (JA__). Second, “the incumbent LEC
6 See Rural Cellular Ass’n v. FCC, 588 F.3d 1095, 1105-06 (D.C. Cir.
2009) (“RCA I”); CompTel v. FCC, 309 F.3d 8, 14-15 (D.C. Cir. 2002);
Alenco Commc’ns, Inc. v. FCC, 201 F.3d 608, 620-22 (5th Cir. 2000); Sw.
Bell Tel. Co. v. FCC, 153 F.3d 523, 537-39, 549-50 (8th Cir. 1998); CompTel
v. FCC, 117 F.3d 1068, 1074 (8th Cir. 1997).
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is likely to have at most the same, and sometimes lower, costs compared to a
new entrant.” Id.; id. ¶191 (JA__). Finally, “in many states the incumbent
carrier still has the continuing obligation to provide voice service and cannot
exit the marketplace absent state permission.” Id. ¶175 (JA__). In light of
these findings – which petitioners do not even acknowledge, let alone attempt
to challenge – the FCC concluded that its interim approach would “speed the
deployment of broadband … while minimizing the impact on the Universal
Service Fund.” Id. ¶174 (JA__).
Petitioners also contend that the Order “flouts the FCC’s longstanding
core principle of competitive neutrality.” Br. 33. That principle generally
holds that “universal service support mechanisms … should not unfairly
advantage nor disadvantage one provider over another, and neither unfairly
favor nor disfavor one technology over another.” Order ¶176 (JA__)
(internal quotation marks omitted). The principle relied on by petitioners,
however, is one that the FCC adopted pursuant to 47 U.S.C. §254(b)(7), and
as such is simply one among several sometimes conflicting principles that
guide its exercise of discretion in distributing universal service support. See
Federal-State Joint Board on Universal Service, 12 FCC Rcd 8776, 8801-03
(¶¶48 & 52) (1997). Moreover, as the FCC explained, “neither the
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competitive neutrality principle nor the other section 254(b) principles
impose inflexible requirements.” Order ¶176 (JA__).
In determining how to best balance the statutorily prescribed principles
governing universal service support (see 47 U.S.C. §254(b)) with
considerations of competitive neutrality, the FCC emphasized that
“incumbent LECs have had a long history of providing service throughout the
relevant areas … [and] generally have already obtained the ETC designation
necessary to receive USF support throughout large service areas.” Order
¶177 (JA__). While recognizing that “other classes of providers may be well
situated to make broadband commitments with respect to small geographic
areas,” the agency accorded greater weight to the incumbent LECs’ “unique”
ability “to deploy broadband networks rapidly and efficiently.” Id. And,
taking account of “the limited scope and duration of the state-level
commitment procedure,” the FCC reasonably “conclude[d] that any departure
from strict competitive neutrality … is outweighed by the advancement of
other section 254(b) principles, in particular, the principles that ‘[a]ccess to
advanced telecommunications and information services should be provided in
all regions of the Nation,’ and that consumers in rural areas should have
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access to advanced services comparable to those available in urban areas.”
Id. ¶177 (JA__) (citing 47 U.S.C. §254(b)(2)-(3)); id. ¶178 (JA__).7
“The Commission enjoys broad discretion when conducting exactly
this type of balancing.” RCA I, 588 F.3d at 1103 (citing Fresno Mobile
Radio, Inc. v. FCC, 165 F.3d 965, 971 (D.C. Cir. 1999)); see also Alenco,
201 F.3d at 621. Indeed, this Court has emphasized that the FCC “may
exercise its discretion to balance the principles against one another when they
conflict,” and “any particular principle can be trumped in the appropriate
case.” Qwest II, 398 F.3d at 1234 (quoting Qwest I, 258 F.3d at 1200).
In any event, petitioners’ claims of disparate treatment overlook key
facts. The state-level commitment procedure is available to price cap carriers
for only five years. During that period, competitive ETCs may compete for
CAF Phase II support in areas where the price cap carrier declines a state-
level commitment. Order ¶514 (JA__). Competitive ETCs that offer mobile
wireless services will also have access to a separate Mobility Fund that is
available only to wireless carriers for mobile services. Id. Citing these facts,
the FCC noted that “many” competitive ETCs “could receive similar or even
7 Petitioners argue that the FCC cannot balance competitive neutrality
against the section 254(b)(2) and (3) principles, because the latter confer no
authority on the agency to require the deployment of broadband-capable
networks. Br. 34-35. Petitioners’ interpretation of sections 254(b)(2) and (3)
is wrong. See pp. 10-13, above.
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greater amounts of funding” after implementation of the reforms in the
Order. Id.
Finally, petitioners claim that “[t]he FCC entirely failed to consider
that making … support available to only [incumbent] LECs would not aid in
opening local telecom markets to effective competition, which was the
principal goal of the 1996 Act.” Br. 35. Contrary to petitioners’ claim, the
statute does not require the FCC to subsidize competition where it would not
otherwise develop. As the FCC explained, “the statute’s goal is to expand
availability of service to users,” Order ¶318 (JA__), “not to subsidize
competition through universal service in areas that are challenging for even
one provider to serve.” Id. ¶319 (JA__); see also Qwest II, 398 F.3d at 1226;
TOPUC, 183 F.3d at 406; Alenco, 201 F.3d at 616.
III. THE FCC’S NEW RULES FOR SUPPORTING MOBILE
WIRELESS SERVICES ARE REASONABLE.
In response to the increasing importance of mobile services to
consumers, the FCC created the Mobility Fund, “the first universal service
mechanism dedicated to ensuring availability of mobile broadband networks
in areas where a private-sector business case is lacking.” Order ¶28 (JA__).
Although existing high-cost support will be phased out during a transition
period, wireless carriers will be eligible for Mobility Fund support. Id. ¶¶29,
512-532 (JA__, __-__).
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During the transition period, the FCC will allocate Mobility Fund
support in two stages. Phase I will provide one-time support of up to $300
million to jump-start deployment of mobile broadband networks in unserved
areas. Order ¶¶28, 301-478 (JA__, ___-___). Phase II “will provide up to
$500 million per year in ongoing support.” Id. ¶28 (JA__); id. ¶¶493-497
(JA__-__).
The FCC will distribute Phase I subsidies through a nationwide
“reverse auction,” by which funding is awarded to the carriers that offer to
expand mobile wireless coverage most cost effectively. Order ¶¶321-329
(JA__-__). The winning bidder must offer both voice and broadband service.
Id. ¶¶358-368 (JA__-__).
On September 27, 2012, the FCC completed the Mobility Fund Phase I
Auction. Based on this auction, thirty-three winning bidders became eligible
to receive a total of $299,998,632 in one-time universal service support to
provide third-generation or better mobile voice and broadband services
covering up to 83,494 road miles in 795 biddable geographic areas located in
thirty-one states and one territory. Mobility Fund Phase I Auction Closes
Winning Bidders Announced for Auction 901, 27 FCC Rcd 12031 (2012).
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A. The FCC Reasonably Eliminated The Wasteful Identical
Support Rule.
Prior to the Order, the FCC’s “identical support rule” “provide[d]
competitive ETCs the same per-line amount of high-cost universal service
support as the incumbent [LEC] serving the same area.” Order ¶498 (JA__)
(citing 47 C.F.R. §54.307). As part of its transition to a more efficient and
economically rational universal service regime, the Order eliminated that
rule, noting prior findings that the rule had “not functioned as intended” and
had produced perverse results. Id. ¶502 (JA__); High-Cost Universal Service
Support, 23 FCC Rcd 8834, 8843-44 (¶¶19-21) (2008) (“Interim Cap
Order”), aff’d RCA I, 588 F.3d 1095; High-Cost Universal Service Support,
25 FCC Rcd 18146 (2010), aff’d Rural Cellular Ass’n v. FCC, 685 F.3d 1083
(D.C. Cir. 2012) (“RCA II”).
Petitioners complain that “[w]hen it repealed the identical support rule,
the FCC ignored its prior policy choice of ensuring competitively-neutral
funding.” Br. 37. The FCC did no such thing. Far from “ignoring” any prior
policy, the agency expressly found that the rule did not further that principle
because it largely distributed subsidies to wireless carriers that do not, in the
majority of circumstances, provide services that supplant the services offered
by incumbent LECs. See Order ¶498 n.826 & ¶503 (JA__, __); Interim Cap
Order, 23 FCC Rcd at 8843-44 (¶¶20-21).
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The FCC adopted the rule “assum[ing] that competitive ETCs would
be competitive LECs (i.e., wireline telephone providers) competing directly
with incumbent LECs for particular customers.” Order ¶498 n.826 (JA__).
The agency thus “concluded that high-cost support should be portable – i.e.,
that support would follow the customer to the new LEC when the customer
switched service providers.” Id.
Unfortunately, the FCC’s prior expectation failed to materialize.
“Overwhelmingly, high-cost support for competitive ETCs has been
distributed to wireless carriers.” Id. ¶503 (JA__). And, while “nearly 30
percent of households … have only wireless voice service,” the remainder
generally subscribe to both wireline and wireless services. Id.; see also RCA
II, 685 F.3d at 1094-95. The consequence was that the identical support rule
did not promote competitive neutrality; it “simply subsidize[d] duplicative
voice service.” RCA II, 685 F.3d at 1094 (internal quotation marks and
citation omitted).
Petitioners also seem to assert that the FCC eliminated the identical
support rule after finding that it does not efficiently support mobile
broadband service. Br. 37. That is incorrect. The FCC, in paragraphs 504-
506 of the Order (JA__-__), found that the identical support rule does not
efficiently support mobile voice service – the service that even petitioners
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concede is eligible for federal universal service support. Br. 12-16. The FCC
explained that “[t]he support levels generated by the identical support rule
bear no relation to the efficient cost of providing mobile voice service in a
particular geography.” Order ¶504 (JA__). Indeed, because support is based
on the costs of the wireline incumbent LEC, wireless carriers often “receive
subsidies well in excess of their costs.” RCA I, 588 F.3d at 1104.
The identical support rule also failed to provide competitive ETCs
“appropriate incentives for entry.” Order ¶505 (JA__); id. ¶¶296-297 (JA__-
__). While the rule has “provide[d] approximately $1 billion in annual
support to wireless carriers, … there remain areas of the country … that lack
even basic mobile voice coverage, and many more areas that lack mobile
broadband coverage.” Id. ¶8 (JA__). This is because “areas with per-line
support amounts that are relatively high may be attracting multiple
competitive ETCs, each of which invests in its own duplicative
infrastructure.” Id. ¶505 (JA__). That “investment,” the FCC found, “could
otherwise be directed elsewhere, including areas that are not currently
served.” Id.; see also RCA I, 588 F.3d at 1104; Interim Cap Order, 23 FCC
Rcd at 8844 (¶21).
Finally, petitioners claim that the FCC failed to “provide a detailed
explanation” of its decision “to replace the [identical support] rule with the
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36
Mobility [Fund Phase] I auction.” Br. 37-38. No such explanation was
required, because the latter did not replace the former. The Mobility Phase I
reverse auction was designed to distribute $300 million in one-time support
for the expansion of third-generation (or better) mobile networks in areas
without such networks. Order ¶314 (JA__). It was not intended to target
areas where ongoing support is required. Id. ¶323 (JA__). Separate and apart
from Mobility Fund Phase I, multiple competitive ETCs serving the same
geographic area will continue to receive subsidies as frozen identical support
phases down during a five-year transition period. Id. ¶¶29, 512-532 (JA__,
__-__).
B. The FCC’s Mobility Fund Phase I Reverse Auction
Preserved State Commission Authority Under Sections
214(e)(2) And (5) Of The Act.
The FCC limited Mobility Fund Phase I support to one provider per
area through a reverse auction because its “priority in awarding USF support
should be to expand service,” not to subsidize multiple providers serving the
same pool of customers in the same geographic area – an outcome the agency
reasonably feared “would drain Mobility Fund resources with limited
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corresponding benefits to consumers.” Order ¶316 (JA__); id. ¶319 (JA__).8
The FCC also defined the areas eligible for support based on census blocks,
the smallest possible geographical unit for which service data is readily
available, because this would “identify unserved areas with greater accuracy
than if [it] used larger areas.” Id. ¶¶331-332, 346 (JA__-__, __).
Petitioners contend that the provision of support to a single ETC in a
given service area preempts state authority under 47 U.S.C. §214(e)(2). Br.
38-41. That subsection provides that a “State commission may, in the case of
an area served by a rural telephone company, and shall, in the case of all
other areas, designate more than one common carrier as an eligible
telecommunications carrier for a service area designated by the State
commission.”
Petitioners’ argument fails because it conflates eligibility for subsidies
with the right to receive subsidies. Although states have authority under the
Act to designate multiple ETCs, 47 U.S.C. §214(e)(2), Order ¶390 & n.662
(JA__, __), “nothing in the statute compels that every party eligible for
8 “The purpose of [the reverse auction] [wa]s to identify those areas where
additional investment can make as large a difference as possible in improving
current-generation mobile wireless coverage.” Order ¶322 (JA__). Thus, in
that auction, “bidders [we]re asked to indicate the amount of one-time support
they would require to achieve the defined performance standards for specified
numbers of units in given unserved areas.” Id. The auction identified
winners based on the lowest per-unit bids.
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support actually receive it.” Id. ¶318 (JA__); FCC Principal USF Br. 61-62.
Section 214(e)(1) of the Act states “[a] common carrier designated as an
eligible telecommunications carrier … shall be eligible to receive universal
service support in accordance with section 254” (emphasis added). Likewise,
section 254(e) states “only an eligible telecommunications carrier designated
under section 214(e) … shall be eligible to receive specific Federal universal
service support” (emphasis added). “This language indicates that designation
as an ETC does not automatically entitle a carrier to receive universal service
support.” Interim Cap Order, 23 FCC Rcd at 8847 (¶29).
Section 254 also “distinguishe[s] between those who are merely
‘eligible’ to receive support and those who are ‘entitled’ to receive benefits.”
Interim Cap Order, 23 FCC Rcd at 8847 ¶29. For example, section 254(e)
provides that “an eligible telecommunications carrier designated under
section 214(e) … shall be eligible to receive specific Federal universal
service support.” In sharp contrast, 47 U.S.C. §254(h)(1)(A) provides that
carriers offering certain services to rural health care providers “shall be
entitled” to have the difference between the rates charged to health care
providers and those charged to other customers in comparable rural areas
treated as an offset to any universal service contribution obligation. This
“careful delineation demonstrates an intention” on the part of Congress “to
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ascribe different statutory rights.” Interim Cap Order, 23 FCC Rcd at 8847
(¶29 & n.87) (citing Transbrasil S.A. Linhas Aereas v. Dep't of Transp., 791
F.2d 202, 205 (D.C. Cir. 1986)).9
Moreover, there “are advantages to obtaining and maintaining an ETC
designation regardless of whether a competitive ETC receives high-cost
support.” Interim Cap Order, 23 FCC Rcd at 8847-48 (¶30). “In particular,”
an ETC could be eligible to receive “low-income universal service support”
from a separate federal mechanism and “universal service support at the state
level.” Id.
For similar reasons, there is no merit to petitioners’ argument that the
Order usurps state authority under 47 U.S.C. §214(e)(5), which allows state
commissions to designate the “service areas” used “for the purpose of
determining universal service obligations and support mechanisms.” Br. 39-
41. While ETCs are required to “offer” supported services “throughout the
service area for which the designation is received,” 47 U.S.C. §214(e)(1),
9 WWC Holding Co., 488 F.3d at 1271, Br. 39, is consistent with the FCC’s
view. In that decision, the Court simply held that “states are given the
primary responsibility for deciding which carriers qualify as ETCs to be
eligible for subsidies from the federal universal service fund,” 488 F.3d at
1271 (emphasis added); it said nothing about whether ETCs, once designated,
are entitled to receive federal support.
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40
nothing in the Act requires the FCC to distribute federal high-cost universal
service support to those same areas.
C. The FCC Reasonably Predicted That The Mobility Fund
Phase II Annual Budget Will Provide Sufficient Support.
Sections 254(b)(5) and (e) of the Act require “sufficient” universal
service support. See 47 U.S.C. §254(b)(5), (e). “[W]hat constitutes
‘sufficient’ support” is “ambiguous”; so long as “the FCC…offer[s]
reasonable explanations of why it thinks the funds will still be ‘sufficient’ to
support high-cost areas,” the Court should “defer to the agency’s judgment.”
TOPUC, 183 F.3d at 425-26; FCC Principal USF Br. 33.
The Order established a $500 million annual budget for Mobility Fund
Phase II, which will provide ongoing support for mobile wireless services.
Order ¶494 (JA__). The FCC found that this amount “w[ould] be sufficient
to sustain and expand the availability of mobile broadband.” Id. ¶495 (JA__).
There is no merit to petitioners’ claim that the FCC “failed to supply a
nexus between any record findings and its conclusion” that the Mobility Fund
Phase II budget would provide “sufficient” funding. Br. 42. First, as
discussed above, see pp. 33-36, elimination of the wasteful identical support
rule significantly reduced the prospective cost of supporting mobility. Order
¶495 (JA__). Second, exercising its predictive judgment, the FCC found that
the four national wireless carriers “would [not] reduce coverage or shut down
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41
towers in the absence of ETC support.” Id.10 Finally, to ensure sufficiency,
the FCC established a waiver process that a wireless ETC may use to
demonstrate that additional support is needed for its customers to continue
receiving wireless mobile voice service. Id. ¶¶539-544 (JA__-__).
Petitioners’ other challenges to the Mobility Fund Phase II budget are
baseless. Petitioners object that “[t]he FCC did not cite to any record
representation by Verizon, Sprint, AT&T, or T-Mobile that it would maintain
current coverage if its USF support is phased out.” Br. 43. But, as the FCC
explained, “[u]nder 2008 commitments to phase down their competitive ETC
support, Verizon Wireless and Sprint have already given up significant
amounts of the support they received under the identical support rule,” and
“nothing in the record show[ed] that either carrier is reducing coverage or
shutting down towers.” Order ¶495 (JA__).11 “Nor [wa]s there anything in
the record that suggest[ed that] AT&T or T-Mobile would reduce coverage or
10 Petitioners argue that the FCC also failed to adhere to Qwest II, 398 F.3d
at 1237, because it “did not attempt to demonstrate that it considered the
§254(b) principles” in establishing the Mobility Fund Phase II budget. Br.
43-44; 42. That is incorrect. The FCC, in paragraphs 307-312 of the Order
(JA__-__) expressly considered the section 254(b) principles, and concluded
that the new Mobility Fund would provide “sufficient” support, id. ¶¶311,
493-497 (JA__, __-__).
11 The FCC’s most recent data show that wireless subscribership in rural
areas is increasing. See Implementation of Section 6002(b) of the Omnibus
Budget Reconciliation Act of 1993, 26 FCC Rcd 9664, 9878 (¶378) (2011).
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42
shut down towers in the absence of ETC support.” Id. Thus, it was sufficient
for the FCC to rely on its predictive judgment that the four national wireless
carriers would not discontinue service absent high-cost support. See Franklin
Sav. Ass’n v. Dir., Office of Thrift Supervision, 934 F.2d 1127, 1147-48 (10th
Cir. 1991); Qwest Corp. v. FCC, 689 F.3d 1214 (10th Cir. 2012).
Petitioners also miss the mark in arguing that “[t]he FCC made no
findings supporting its conclusions that $579 million was sufficient support
for regional and small wireless [competitive] ETCs in 2010 and that $500
million in annual support would be sufficient for them in the future.” Br. 43.
This comparison of funding levels is meaningless given that the FCC
eliminated the flawed identical support rule, which subsidized duplicative
voice services, Order ¶¶316, 319, 496, 503 (JA__,__,__, __); RCA II, 685
F.3d at 1094, at inefficient levels, Order ¶¶504-505 (JA__-__). As we
explain above, see pp. 33-36, by declining to subsidize multiple providers
serving the same pool of customers in the same geographic area, the FCC can
more cost-effectively expand mobile wireless coverage in rural areas
prospectively.
Finally, petitioners claim that “no findings supported the FCC’s
conclusion that providing 800 percent more USF funding to large
[incumbent] LECs than to wireless [competitive] ETCs would constitute
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43
competitively neutral funding.” Br. 43. To the contrary, the FCC addressed
this issue. “Although the budget for fixed services exceeds the budget for
mobile services,” the FCC found “that today significantly more Americans
have access to 3G mobile coverage than have access to residential broadband
via fixed wireless, DSL, cable, or fiber.” Order ¶494 (JA__). The FCC
“expect[ed] that as [fourth-generation wireless service] is rolled out, this
disparity will persist.” Id. Hence, it was not “unfair” for the FCC to provide
different levels of funding to wireline and wireless carriers to help ensure that
consumers have access to fixed and mobile broadband services. See RCA I,
588 F.3d at 1104-05.
D. The FCC Reasonably Declined To Establish A Separate
Mobility Fund For Insular Areas.
The FCC has long recognized that “the presence of certain additional
factors on tribal lands” warrants specially tailored support mechanisms for
those areas.12 These factors include, but are not limited to: cultural and
language barriers; access to rights-of-way, where access is controlled by
Tribal authorities; and questions concerning a state’s authority to assert
12 Federal-State Joint Board on Universal Service: Promoting Deployment
and Subscribership in Unserved and Underserved Areas, Including Tribal
and Insular Areas, 15 FCC Rcd 12208, 12226 (¶32) (2000) (“Twelfth Report
and Order”); see also High-Cost Universal Service Support, 25 FCC Rcd
4136, 4166 (¶50) (2010) (“Insular Areas Order”).
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44
jurisdiction over the provision of telecommunications services on Tribal
lands. Twelfth Report and Order, 15 FCC Rcd at 12226 (¶32). Those same
“factors” led to the creation of a Tribal Mobility Fund in the Order, id. ¶482
(JA__).
The FCC, in the Order, denied petitioners’ request to establish a
separate Mobility Fund for insular areas on the ground that “[insular] areas
generally do not face the same level of deployment challenges as Tribal
lands.” Order ¶481 n.790 (JA__).13 Indeed, in Appendix D to the Order
(JA__-__), the FCC denied a petition filed by Puerto Rico Telephone
Company, Inc. (“PRTC”) seeking reconsideration of a 2010 decision
declining to adopt a new insular support mechanism, similar to the
mechanism sought by petitioners. The FCC was not persuaded by PRTC’s
argument that the “costs and burdens of providing telephone service” in
insular areas warrant a separate support mechanism. Id. ¶13 (JA__); Insular
Areas Order, 25 FCC Rcd at 4159-62 (¶¶38-42). It also rejected PRTC’s
argument that additional high-cost support is necessary to address low
13 Accord Federal-State Joint Board on Universal Service, 12 FCC Rcd
8776, 8946 (¶315 & n.791) (1997), aff’d in part and reversed in part,
TOPUC, 183 F.3d 393; Federal-State Joint Board on Universal Service, 18
FCC Rcd 22559, 22636-39 (¶¶138-40) (2003), remanded in part, Qwest II,
398 F.3d 1222; Federal-State Joint Board on Universal Service, 19 FCC Rcd
23824, 23831-32 (¶20) (2004); Insular Areas Order, 25 FCC Rcd 4136.
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45
telephone subscribership levels in insular areas, which the FCC found are
“related to consumer income” and thus are better addressed through “its
existing low-income support programs.” Id. ¶11 (JA__); Insular Areas
Order, 25 FCC Rcd at 4155-57 (¶¶33-35).
Petitioners’ requests for an insular mobility fund relied on the same
flawed arguments. See Br. 46 n.28. Petitioners now complain that the FCC
erred in not providing a fuller response when it declined to adopt their
proposal. Br. 44-46. The FCC, however, “need not repeat itself incessantly.”
Bechtel v. FCC, 10 F.3d 875, 878 (D.C. Cir. 1993); see also Global Crossing
Telecomms., Inc. v. Metrophones Telecomms., Inc., 550 U.S. 45, 63 (2007);
RCA II, 685 F.3d at 1094. As Appendix D to the Order makes clear, there
are no changed circumstances that would require the FCC to reconsider its
longstanding (and repeatedly confirmed) view that a separate support
mechanism for insular areas is unnecessary because those areas do not exhibit
cost or other characteristics that warrant an exemption from generally
applicable high-cost support mechanisms. Thus, it was sufficient for the FCC
to deny petitioners’ request by reiterating that insular areas do not face unique
“deployment challenges” that would warrant the creation of a separate
support mechanism. Order ¶481 n.790 (JA__).
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46
CONCLUSION
The petitions for review should be dismissed in part and otherwise
denied.
Respectfully submitted,
WILLIAM J. BAER
ASSISTANT ATTORNEY GENERAL
ROBERT B. NICHOLSON
ROBERT J. WIGGERS
ATTORNEYS
UNITED STATES
DEPARTMENT OF JUSTICE
WASHINGTON, D.C. 20530
SEAN A. LEV
GENERAL COUNSEL
PETER KARANJIA
DEPUTY GENERAL COUNSEL
RICHARD K. WELCH
DEPUTY ASSOCIATE GENERAL
COUNSEL
/s/ Maureen K. Flood
LAURENCE N. BOURNE
JAMES M. CARR
MAUREEN K. FLOOD
COUNSEL
FEDERAL COMMUNICATIONS
COMMISSION
WASHINGTON, D.C. 20554
(202) 418-1740
March 18, 2013
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CERTIFICATE OF COMPLIANCE
Certificate of Compliance With Type-Volume Limitations, Typeface
Requirements, Type Style Requirements, Privacy Redaction
Requirements, and Virus Scan
1. This brief complies with the type-volume limitation of the Second Briefing
Order. It does not exceed 15% of the size of the brief to which it is responding. The
Uncited Wireless Carrier Universal Service Fund Principal Brief was certified to
be 9,199 words in length. Therefore, the FCC may file a response brief up to
10,578 words in length. This brief contains 9,582 words, excluding the parts of the
brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).
2. This brief complies with the typeface requirements of Fed. R. App. P.
32(a)(5) and 10th Cir. R. 32(a) and the type style requirements of Fed. R. App. P.
32(a)(6) because this filing has been prepared in a proportionally spaced typeface
using Microsoft Word 2010 in 14-point Times New Roman font.
3. All required privacy redactions have been made.
4. This brief was scanned for viruses with Symantec Endpoint Protection,
version 11.0.7200.1147, updated on March 17, 2013, and according to the program
is free of viruses.
/s/ Maureen K. Flood
Maureen K. Flood
Counsel
March 18, 2013
Appellate Case: 11-9900 Document: 01019020718 Date Filed: 03/18/2013 Page: 55
CERTIFICATE OF SERVICE
I hereby certify that on March 18, 2013, I caused the foregoing Federal
Respondents’ Uncited Response to the Wireless Carrier Universal Service Fund
Principal Brief to be filed by delivering a copy to the Court via e-mail at
FCC_briefs_only@ca10.uscourts .gov. I further certify that the foregoing document
will be furnished by the Court through (ECF) electronic service to all parties in this
case through a registered CM/ECF user. This document will be available for
viewing and downloading on the CM/ECF system.
/s/ Maureen K. Flood
Maureen K. Flood
Counsel
March 18, 2013
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